Correlation Between Lyxor 1 and Industrial

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Industrial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lyxor 1 and Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and Industrial and Commercial, you can compare the effects of market volatilities on Lyxor 1 and Industrial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lyxor 1 with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Industrial.

Diversification Opportunities for Lyxor 1 and Industrial

0.72

Correlation Coefficient

Lyxor 1  Industrial

Poor diversification

The 3 months correlation between Lyxor and Industrial is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Lyxor 1 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lyxor 1 are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Industrial go up and down completely randomly.

Pair Corralation between Lyxor 1 and Industrial

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 1.15 times less return on investment than Industrial. But when comparing it to its historical volatility, Lyxor 1 is 2.21 times less risky than Industrial. It trades about 0.11 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Industrial and Commercial on December 31, 2024 and sell it today you would earn a total of  4.00  from holding Industrial and Commercial or generate 6.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lyxor 1   vs.  Industrial and Commercial

Lyxor 1

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Industrial and Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Lyxor 1 and Industrial

The main advantage of trading using opposite Lyxor 1 and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, Industrial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Industrial will offset losses from the drop in Industrial's long position.

The idea behind Lyxor 1 and Industrial and Commercial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.